Corrected

Peoples Gas parent to be acquired in $9.1 billion deal

Chicago is losing its second utility headquarters in less than three years with the sale announced today of Integrys Energy Group Inc., parent of Peoples Gas, to Milwaukee-based Wisconsin Energy Corp.

Wisconsin Energy agreed to pay cash and stock valuing Integrys at about $5.8 billion, a 17 percent premium from its June 20 close. The deal also includes assuming debt.

Integrys stock was up 14.8 percent shortly after the market opened this morning.

“It's a great deal for Integrys shareholders,” said Charles Fishman, a St. Louis-based analyst for Morningstar Inc., who valued Integrys at $54 a share. “It's a real healthy premium and they're getting shares in a very solid company.”

Integrys has missed analysts' per-share profit expectations in four of the past eight quarters, according to data compiled by Bloomberg. Wisconsin Energy's earnings per share have exceeded the estimates for 18 consecutive quarters.

Integrys CEO Charlie Schrock will retire upon completion of the deal, which the companies expect in mid-2015. All leadership positions after the acquisition will be assumed by senior executives of Wisconsin Energy.

In addition, Integrys announced that it's in the late stages of auctioning its retail energy supply unit, Integrys Energy Services. That's potentially bad news for the city of Chicago because Integrys Energy Services provides electricity to households and small businesses under a contract with the city that now is resulting in higher prices for many residents than they would get with Commonwealth Edison Co.

It's unclear which company will inherit that deal, the largest municipal energy contract on behalf of residents in the country.

The Integrys sale comes more than two years after Naperville-based Nicor Inc., the gas utility for most of suburban Chicago and the largest gas utility in Illinois, was sold to Atlanta-based AGL Resources Inc.

That will leave Chicago-based Exelon Corp., owner of ComEd and the largest nuclear plant owner in the country, as Chicago's only remaining utility headquarters.

Integrys employs 5,000 overall; 1,800 of those are in the Chicago area, and 1,300 of those work for Peoples Gas. Information wasn't immediately available on the number of people who work in Integrys' Chicago headquarters. Those jobs presumably are at risk.

Integrys itself is the product of a merger of a Chicago utility with a Wisconsin-based utility. Peoples Energy Corp. sold seven years ago to Green Bay, Wisconsin-based WPS Resources Corp. But the corporate headquarters moved to Chicago, and the sprawling company owned utilities in Wisconsin, Michigan and Minnesota in addition to Peoples, which delivers natural gas in the city of Chicago, and its sister utility North Shore Gas, which serves most of the North Shore suburbs.

Peoples Gas serves about 831,000 customers in the city, and North Shore Gas about 159,000 in the suburbs.

MAINTAINING CAPITAL INVESTMENT PLAN

Wisconsin Energy promised to maintain Integrys' five-year capital investment plan to make $3.5 billion in "infrastructure and operational" investments in all of its utilities. For Chicago, most important of those is Peoples Gas' accelerated program to replace aging cast-iron gas pipes beneath the city's streets. Last year, the utility won approval from the state General Assembly to impose a surcharge on heating bills to finance the program.

Wisconsin Energy also said it would have "operating headquarters" in Chicago and Green Bay, as well as Milwaukee.

The deal will be subject to approval by the Illinois Commerce Commission, among other regulatory agencies, which will have much to say about the conditions for the sale. Oftentimes, utilities promise to keep rates steady for a period of time when they agree to acquisitions that will result in the elimination of a corporate headquarters. That was the case with AGL, which promised a three-year rate freeze when it bought Nicor.

Notably, there were no such promises in Wisconsin Energy's purchase of Integrys.

Bloomberg News contributed to this report.

Note: This story has been updated to correct the purchase figure to about $5.8 billion. That does not include assumed debt, which is part of the deal total of $9.1 billion.